First child - best way to invest
 

How are people funding their child's college/future? 529 plans sound great but major downside is that it has to be used for education. I'm sure universities will be around in 20 years but there are many alternatives so that's a risk. Mutual funds have greater flexibility but have to pay income tax on withdrawals.

I'm thinking mutual funds and just paying for my child's taxes for any withdrawals, not sure how that works as college students are still dependents. I'm also hoping to pay for some/most of the college tuition so this route allows my child to use the money for other purposes, like flight training 😂

Look into whole life insurance policies for your children. Set a target amount you’d like to provide for school and find a policy that will get you there by the time their 18. Money grows tax free and is withdrawn tax free and used for anything l. I know people think theses policies are the devil, but check out policies at a mutual company. They can serve way more purposes than just life insurance

I’m not. I’m teaching them responsibility and accountability. Also teaching them about making sound financial decisions regarding their future.

You can invest in mutual funds within a 529 plan. Ask the pros:

https://investor.vanguard.com/529-plan/


And you can use those withdrawals tax free for any QUALIFIED expense. Unqualified expenses you will owe tax on. But the list of qualified expenses is getting bigger all the time.

https://www.fidelity.com/learning-ce...e-529-spending

I opened up a 529 plan when my kid was born. Fairly conservative allocation, self-managed mutual funds with low fees. Started with $10K initial investment and $200/mo ever since. Fast forward 16 years, account now has a six figure balance. We’re On track to fund a 4yr degree! Start early, Slow and steady.... Enjoy the ride, if goes fast!

Good job. May we all be so successful.

Success favors the prepared.

We did the same thing, except I opened mine a bit earlier, when my wife and I knew we were getting married.

Fast forward 7 years (and 3 kids later), the first account has close to $50,000 in it. I also contributed $200 a month plus 1/3 of any profit sharing I received.

The last 10 years were kind to aviation. I was so afraid of a 2008-2009 repeat that I super saved. Glad I did.

529 plans are almost all extremely conservative in their allocation. Over a 20 year-ish period you’ll have a time horizon to even out the ups and downs and will have a much greater likelihood of success investing in a straight SP500 index fund. Then you can help junior pay for whatever you want (college, housing, travel abroad) with no restrictions from a greater nest egg, even with the tax implications.

Whatever you do: create a plan and diligently stick to it.

Most 529 plans let you allocate from a variety of choices - including S&P index funds and ETFs and unlike Index funds outside the 529 you are not paying federal (and often state) taxes on any qualified withdrawals. He ought to consult the pros (I like Vanguard) for the details in his state but in most states the programs have more flexibility than you seem to think they do.
I certainly agree with your last statement though

https://investor.vanguard.com/529-pl...th-end-returns

It’s tough and it’s out of control. My first child was born in 2000. That year I looked at the average cost of a four year degree ($20,000/yr) and ran some numbers. I assumed 6% college cost inflation and an investment return of 9%. To pay for a $80,000 education 18 years in the future, I calculated you need to invest $750 per month for 18 years. That was insane. I could commit to $500/mo which is still insane. Child #2 came along in 2002 and I split the $500 two ways ($250/mo in 529s for each). Fast forward to 2018. First child goes to college, which now costs $50,000/yr and has $100,000 in 529, so about half of what’s needed. 18 years of consistent investing and I could only cover half.....